Aug 22 The Overlooked Potential of Iran's Women Entrepreneurs

Recently, President Rouhani halted the third round of public sector hiring that is based on nationwide entrance exams. He instructed his ministers to review the sex-based quotas that have been in place for years. These quotas, which severely restrict womens' access to employment, are not opaque state targets. Rather, they are openly announced on an annual basis. The registration information for the qualifying exams of the education ministry stated upfront that of the 3,703 available positions, only a maximum of 630 will be open to women, regardless of performance on the exam. In larger urban areas where more women may be either merely interested or, more possibly, economically forced to work to make ends meet, there are more restrictive quotas because the pool of male applicants is larger. For instance, when the Ministry of Education needed 190 new hires in Tehran, only six positions were given to women. The field of education is a sector that is female-intensive across countries because teaching is considered as an "appropriate” profession for women since it is conducive for work-home balance.

With even the education sector shutting women out, other sectors are almost impossible for female candidates to penetrate. Thus, women hold only 10% of jobs in the public sector, which is the main employer of the country. During the Ahmadinejad presidency, a set of policies were introduced to presumably support working women to manage their dual roles as mothers and wives. In reality, however, these policies imposed a high cost to employers and created disincentives in the hiring of women. These extra costs were particularly heavy in the private sector, where employers had to bear the expenses. Last year the government announced that since 2005, the actual number of women in the workforce has dropped from 3.96 million to 3.1 million. For any nation, a drop of close to one million workers is a sharp decline. It is especially so for a country with an already low existing base of female workers and a large population. This disproportionality translates into a high economic dependency ratio, i.e. the number of people in a family depending on one earner. Hence, families are increasingly vulnerable to potential economic shocks and policy changes. According to the International Labor Organisation (ILO), the labor force participation of Iranian women is a mere 17%. Iran ranks among the lowest in the world, even below Saudi Arabia– a fact that surprises even Iranians.

There is, therefore, a growing consensus that the female labor force participation has reached alarming lows and that this fact is detrimental to the overall economic and societal health of the country. The issue is now being increasingly debated by economists and policy makers, and not just the women’s rights activists. Another indicator is the urgent emphasis on creating economic opportunities for university educated women. It is for this reason that President Rouhani called for a review of the fairness of quotas. Despite affirmative action quotas for men, and the restriction of certain study streams to female students in some university, women still make up about 60% of university entrants (down from 64% before), solely based on scores in gender blind university entrance exams – the Konkur. Their share in the engineering and science fields--subject matters often dominated by men in Western education systems--is approximately 70%. According to UNESCO, Iran has one of the largest cohorts (in terms of actual numbers rather than just percentages) of female engineering and science students in the world.

Despite the many obstacles, women’s entrepreneurship is a bright light in Iranian society. Market-relevant training, such as engineering and computers, and the dearth in actual opportunities have spawned an entrepreneurial streak in many Iranian women. According to a study by Bahramitash and Salehi, based on a survey of male and female-owned firms that closely follows a similar methodology of the World Bank’s Enterprise Surveys, about 9.6% (applying sample weights) have a female principal owner. Female ownership rises for large firms (50+ employees) to 13.9%. On average, these firms are slightly younger than their male peers (7.1 vs 7.8 years, respectively), which suggests that they are perhaps slightly more technologically advanced than the businesses of their male counterparts. For medium (10-49 workers) and small firms (up to 10 workers) female ownership is 8.2% and 10%, respectively. Bahramitash and Salehi further find that women entrepreneurs are in more dynamic sectors of the economy. Out of necessity, their superior educational accomplishments and ingenuity have resulted in more innovative business models and ventures.

Iranian entrepreneurs have faced substantial obstacles in recent decades. Besides international sanctions, Iranian entrepreneurs must contend with policy uncertainties, limited access to telecoms (especially a slow and constricted Internet), credit constraints, non-competitive behavior in markets, difficulties in obtaining permits, corruption, and the high costs and uncertainties of the legal system. Women entrepreneurs face all of these challenges, and some more. According to the IFC's Women, Business, and Law Report (2016), Iranian women face differential treatment in 23 specific areas of the law. In the Bahramitash/Salehi study, too, women-owned firms (not just the women owners) responded more adversely to sanctions, slow internet, anti-competitive behavior, and policy uncertainty.

On a more positive note, Bahramitash and Salehi found that women-owned enterprises reported fewer problems related to corruption when obtaining permits and easier access to necessities such as finance. This may be consistent with global trends that show that bribe takers are more reluctant to approach women for bribes, and that women have a better repayment track record as borrowers.

Iran is a bastion of opportunities. In the words of Sir Martin Sorrell, CEO of global communications firm WPP, “Iran is one of the world’s last remaining untapped opportunities of that scale, short of Mars and the Moon.” Women entrepreneurs should not be overlooked when foreign companies seek potential local partners. However, most trade delegations visiting Iran have made little effort to engage Iranian businesswomen.Too few foreign delegations have included women from their own countries in their midst. And, male delegations meet Iranian male counterparts, thereby widening the existing gender gap at home and in Iran.

The chief of a recent international delegation that made the effort to meet with a group of women entrepreneurs, commented:

“I can truthfully say that I have never met such a group of dynamic and high ranking women entrepreneurs in one room before. Generally when we have such meetings with the private sector it is with men in the traditional fields and a few token women… so it is quite amazing that Iran has this caliber of women 'marching on.' What was also interesting and possibly counter-intuitive is that when asked if they faced any barriers as women, most of them said they had no real issues in the business arena that related to gender discrimination.”

This is what characterizes true entrepreneurs—seeing opportunities and not the numerous hurdles along the way. In short, Iranian women entrepreneurs are ready, savvy, willing, and able to contribute to the emerging economic possibilities coming to their country. Sidelining them robs everyone of opportunities.